The fiduciaries for certain domestic decedent and bankruptcy estates and certain domestic trusts are required to file Form 1041.

The schedules associated with Form 1041:

The following list contains and defines common terms used with Form 1041 (See IRM 3.11.14.1.6, Terms/Definitions, for more definitions.)

A single individual or group may set up several trusts. These trusts may have almost identical names or structures.

Mix-ups between these entities frequently occur since a single individual or firm usually administers both trusts. To resolve these cases:

Most trusts are required to file a calendar year return.

The only Form 1041 filers permitted to retain or adopt a fiscal year include:

To change the accounting period of an estate, a Form 1128, Application to Adopt, Change or Retain a Tax Year, must be filed and approved.

The bankruptcy estate of an individual in a Chapter 7 or Chapter 11 case may change its accounting period one time without approval.

Form 7004, Application for Automatic Extension of Time to File Certain Business Income Tax, and Other Returns is used to request an automatic extension of time to file certain business income tax, information, and other returns. An extension of time to file Form 1041 will be granted if the taxpayer completes Form 7004 properly, makes a proper estimate of the tax (if applicable), files the form by the due date of the return to which the Form 7004 applies, and pays any tax that is due.

Generally, Form 7004 is filed on or before the due date of the Form 1041. Form 7004 does not extend the time for payment of tax. Therefore, to avoid interest charges and a late payment penalty, payment of any balance due on line 8 of Form 7004 is required by the due date of the return for which the extension is filed.

If more time is needed to file the estate or trust return, Form 7004 extends the time to file 5 1/2 months. Therefore, for trusts and estates (other than bankruptcy estates) filing Form 1041 that requested a valid extension on or before April 15th, the return is due on or before September 30th. Notice 2020-23, Additional Relief for Taxpayers Affected by Ongoing Coronavirus Disease 2019 Pandemic, extended the due date for filing 2019 tax returns and payments, as well as the first two 2020 estimated tax payments to Wednesday, July 15, 2020. Businesses that need additional time to file must file Form 7004. The extended return due date will not exceed October 15, 2020.

If the due date of a Form 1041 series return falls on a Saturday, Sunday, or legal holiday, the Form 1041 filer can file on the next day that is not a Saturday, Sunday, or legal holiday. See IRM 20.1.2.2.1, When Timely Mailing Equals Timely Filing or Paying (Received Date vs. Filing/Payment Date).

See IRM 21.7.4.3.5, Form 7004, Application for Automatic Extension of Time To File Certain Business Income Tax, Information, and Other Returns - Tax Years Beginning Before January 1, 2016, and IRM 21.7.4.3.6, Form 7004, Application for Automatic Extension of Time to File Certain Business Income Tax, Information, and Other Returns - Tax Years Beginning After December 31, 2015, for more general information.

The method of calculating the liability using Form 1041 varies depending on the type of taxpayer involved.

Decedent’s estates and trusts compute their income tax liability using the rates in the table below. The taxpayer enters the computed tax liability on line 1a of Schedule G. Follow the Schedule G submitted by the taxpayer as there can be other credits or taxes applicable. The total from line 7, Schedule G is the amount entered on the "Total tax" line on Form 1041.

If the decedent’s estate or trust used Schedule D and the alternative tax computation, follow the computation using the applicable form line-by-line instructions.

If the bankruptcy estate must file a return, the trustee (or debtor-in-possession) completes the identification area at the top of the Form 1041 and lines 22 - 29 and signs and dates it. The trustee uses the Form 1041 as a transmittal for Form 1040, U.S. Individual Income Tax Return.

Per IRC 6654(I), new and existing trusts and estates must make quarterly estimated tax payments in the same manner as individuals, except an estate and certain grantor trusts exempt from making such payments during their first two taxable years.

Generally, the estate or trust must make an estimated payment if it expects to owe at least $1,000 in tax during the taxable year and it expects the withholding and credits to be less than the smaller of:

The exceptions from making estimated tax payments for some entities include:

See the Disaster Assistance Information on SERP regarding the postponement of certain estimated tax payments due to various disasters and prior revisions of this IRM for more information on these postponements.

The following due dates for estimated tax payments for calendar year filers include:

Charitable trusts (Form 1041 with Fiduciary Code 9) and private foundations are subject to corporate estimated tax provisions under IRC 6655.

Form 1041-ES, Estimated Income Tax for Estates and Trusts, payment vouchers are mailed along with quarterly estimated payments to:
Internal Revenue Service
P.O. Box 932400
Louisville, KY 40293-2400

MeF will accept the current year and two prior tax years. Taxpayers cannot use MeF to file returns for tax years earlier than the two prior years. When an electronically transmitted business return is rejected there is a 10-day Transmission Perfection Period to perfect that return for electronic re-transmission. The perfection period is 10 calendar days for any business return that is rejected.

Qualified fiduciaries or transmitters can file Form 1041 and related schedules electronically. For more information about becoming an e-file provider, visit the IRS.gov website Become an Authorized e-File Provider.

To file Form 1041 electronically each software developer, transmitter, and large taxpayer wanting to participate in the MeF program MUST successfully pass the Assurance Testing System (ATS). The assurance testing system is a process that tests the tax preparation software and/or the electronic transmissions to ensure the participant's software and/or the electronic transmissions have the correct file specifications to file returns electronically. Testing for Form 1041 is generally available in ATS by the start of November each year. See Pub 5078, Modernized e-file (MeF) Test Package, and IRM 3.42.4.13, Assurance Testing System (ATS) Process, for more information on the testing process.

MeF allows for Year-Round Filing – MeF allows for year round submission of returns. For more information about the MeF system status and possible delays, refer to the Modernized e-file (MeF) status page.

Direct questions or problems related to the following issues to the e-help desk at 866-255-0654. For current year questions regarding MeF system problems, new transmitter development problems and new development of forms related to the MeF programs, send to the MeF mailbox at MeFmailbox@irs.gov:

Filers may also write to the IRS at the following address:
Ogden Submission Processing Center
Mail Stop 6052
1160 West 1200 South
Ogden, UT 84201

The following publications designed to provide the general requirements and procedures for Form 1041 e-file Program, U.S. Income Tax Return for Estates and Trusts include:

Taxpayers must supply their name control when filing electronically. See IRM 21.7.13.5.6, EIN Assignment: Estate, for information on the name control assigned to estates and IRM 21.7.13.5.8, EIN Assignment: Trust, for information on the name control assigned to trusts. Also, see Document 7071-A, BMF Name Control Job Aid, for additional information.

Identification of electronic returns include a unique Document Locator Number (DLN) and the words "Electronic Return - Do Not Process" at the bottom of the return.

The following file location code/tax class/document code for returns previously processed in Philadelphia include:

The following file location code/tax class/ document code for returns processed in Ogden include:

The IRS changed the Multiple Tax Return Listing process used to sign electronically filed Form 1041, U.S. Income Tax Return for Estates and Trusts. Beginning January 1, 2014, the IRS e-file Signature Authorization document, Form 8879-F, can only associate with a single 1041 return.

Beginning TY 2014, taxpayers who filed their original Form 1041 electronically via MeF may file a TY 2014 amended return through MeF. Other taxpayers must complete an amended return on paper and file it at the campus where they would normally file a paper return.

Use Corporate File On-Line (CFOL) command codes (CC) to research the account. Request the original return only when necessary. If it is necessary to secure the signature, use CC ESTAB and notate "Provide Form 8453" in the remarks section.

Section 17 of the Worker, Homeownership, and Business Assistance Act of 2009, P.L. 111-92, amends IRC 6011(e), effective for returns filed after December 31, 2010, by adding at the end new paragraph (3): "SPECIAL RULE FOR TAX RETURN PREPARERS." In general, under new paragraph (3)(A), the Secretary requires the use of magnetic media (electronic) filing for any individual income tax return (includes estates and trusts) prepared by a tax return preparer if; such return is filed by such tax return preparer, and such tax return preparer is a specified tax return preparer for the calendar year during which such return is filed.

Accounts Management processes various Form 1041 adjustment requests. Consider all prior adjustments to the account before making the requested adjustment.

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Form 1041 claims and/or amended returns involving Ponzi Scheme issues (including language discussing removal of phantom or fraudulent income), may meet examination criteria. Route to Examination as CAT-A ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡

Action required on tax adjustments:

Action required on credit adjustments:

The following Form 1041 CRNs include:

As a result of the Social Security Domestic Employment Reform Act (SSDERA), taxpayers must file Schedule H (Form 1040), Household Employment Taxes, to report household wages and employment taxes paid to domestic household workers such as a gardener, nanny, cook or butler.

SSDERA mandates Schedule H to be filed on a calendar year basis. Therefore, FY filers must attach a Schedule H for a calendar year.

Individuals that hire a domestic employee (as defined in Pub 926), such as a gardener or a nanny, must file Schedule H. See IRM 21.6.4.4.8, Schedule H, Household Employment Taxes, for more information on individuals reporting employment taxes.

The information contained in the following subsections of this section pertain to Schedules H processed on MFT 05. Besides trusts (a trust can be a domestic employer) with domestic employees, certain tax-exempt entities not required to file income tax returns may have domestic employees. These groups can file loose Schedules H rather than filing an income tax return and attaching Schedule H or including these domestic employees on their Form 941. Processing information is found later in IRM 21.7.4.4.1.11.2.1, Loose Schedule H (BMF).

For information on related subjects, see the subsections shown below:

It is strongly recommended that only a small group of employees work cases involving BMF Schedules H.

Form 1041-T is used by a trust or, for it’s final tax year, a decedent’s estate may elect under Section 643(g) to have any part of its estimated tax payments (but not income tax withheld) treated as made by a beneficiary or beneficiaries.

If a trust files a valid Form 1041-T by the 65th day after the close of the tax year, the beneficiary who is allocated a payment is treated as receiving a distribution on the last day of the taxable year of the estate or trust. The distribution is included in the distributable net income (DNI) from the trust or estate for that tax year. If a beneficiary and the estate or trust has different tax years, the DNI from a fiscal year or a short year ending with or within the beneficiary’s tax year is included in income for that tax year. Treas. Reg. section 1.662(c)–1. The beneficiary is considered to make a payment of estimated tax on January 15 following the last day of the taxable year.

Form 1041-T is a stand-alone form (even if filed with a Form 1041) that is filed by the due date for the Form 1041-T. See IRM 21.7.4.4.1.12.1(1), for applicable Form 1041-T due dates.

There are no provisions of law for transferring the credit for Federal Income Tax Withheld (FITW) on a Form 1041 Trusts and Estates account to an individual taxpayer's (beneficiaries) Form 1040 account. Section 643(g) allows the allocation of estimated tax payments on Form 1041-T and IRC 643(d) allows for the allocation of back-up withholding but not for transferring FITW. See the Instructions for Form 1041, line 24e and IRM 21.6.3.4.2.2, Withholding (W/H) Tax Credit, for more information.

Correspondex Letter 2305C, Estimated Tax Credits to Beneficiary - Form 1041-T was revised to respond to inquiries received on Form 1041-T. However, you may use another "C" letter if necessary.

The Victims of Terrorism Tax Relief Act of 2001 (the Act) was enacted on January 23, 2002. The Act amends IRC 692, by adding IRC 692(d) which provides that the IRS will forgive the federal income tax liability of those killed in the following attacks for certain tax years:

IRC 692(d) also allows that the minimum amount of relief for victims of the specified attacks is $10,000. The $10,000 minimum forgiveness applies to the original or amended Form 1040, U. S. Individual Income Tax Return, and Form 1041, U. S. Income Tax Return for Estates and Trusts. See the October 1, 2002, through October 1, 2007, revisions of this IRM for more information on the Victims of Terrorism Tax Relief Act of 2001 - Tax Forgiveness.

Refer all claims and inquiries referring to Victims of Terrorist Attacks and the 9/11 Attack to the KITA/KIA team in Kansas City. These claims are expeditiously processed in the Kansas City KITA team. If received at any other campus, reassign the claim to the KITA team using IDRS 0933578782, and category code "KITA".

Government National Mortgage Association (GNMA) Trusts are assigned a pool number which becomes the name of the trust with the first four digits of the pool number being the name control on the account. The fiduciary name is the owner of the GNMA Trust. When an EIN is assigned to a GNMA Trust pool number, it must remain with the pool number even when purchased by another fiduciary. ENMOD shows the pool number assigned to the GNMA Trust at the beginning of the first name line. Therefore, when a GNMA Trust account is sold, the EIN and pool number remain the same and only the fiduciary name changes.

GNMA Trust Pool Returns are Non-Taxable Grantor Trust returns which should contain no taxable income.

When a GNMA Trust is sold and bought during the year, each fiduciary files a short period return, which results in a Duplicate Filing Condition (DUPF). Determine which fiduciary is selling and which one is purchasing to perfect the fiduciaries name and address on ENMOD to the purchasing fiduciary.

It is not necessary to process the short period return to the current period. Adjust the account accordingly. The seller should show in box F and G; the pool number, that it is a final return, and the date of sale. The buyer should show in box F and G; the pool number, that it is an initial return, and the date of purchase. If you cannot determine which fiduciary is selling and which one is buying from the available information, try to contact the taxpayer. If unable to secure the information, DO NOT change the care of/sort name line and the address currently on ENMOD.

If you receive a DUPF in which the pool number does not match the EIN:

If an estate or trust is the recipient of a portion of an early distribution, or if the trust or estate does not receive at least the minimum required distribution (excess accumulations) from their Individual Retirement Arrangement (IRA), they may be required to file Form 5329 Additional Taxes on Qualified Plans (Including IRAs) and Other Tax Favored Accounts. Estates and trusts not otherwise required to file Form 1041, may file Form 5329 by itself.

If the trust or estate does not receive at least the minimum required distribution, a 50 percent excise tax (penalty) is assessed on the excess accumulations. Part IX, Additional Tax on Excess Accumulation in Qualified Retirement Plans (Including IRAs), is completed when the taxpayer did not receive the minimum required distribution from their qualified retirement plan. The amount posts to master file as part of the TC 150.

If you receive a loose Form 5329 from a trust or estate reporting an addition to tax, and if:

The excise tax in Part IX can be waived if the taxpayer establishes the excess accumulation is due to a reasonable error and that steps were taken to correct the situation. If you receive a request for abatement on an account with TC 150 and you determine abatement of the 50 percent excise tax (penalty), abate with TC 291 and allow CP 210/220 Notice to generate to taxpayer.

If you receive a loose Form 5329 with no TC 150 and a request for abatement of the 50 percent tax in Part IX, you must prepare a dummy return as directed in paragraph (3) above. If you determine abatement of the 50 percent tax is necessary, enter $.00 on page 2, Schedule G, line 9. Write "Form 5329" to the left of the entry. Carry this amount from line 9 to line 24, total tax, on page 1 of Form 1041. Send the taxpayer Letter 1803C, IRA/Keogh Inquiry, and advise them that we have waived the 50 percent additional tax.

If you receive a loose Form 5329 with a TC 150 on the account and a request for abatement of the 50 percent tax in Part IX, and you determine not to assess the 50 percent tax, close with a TC 290 for $.00 and send the taxpayer Letter 1803C, IRA/Keogh Inquiry, and advise them that we have waived the 50 percent additional tax. If you decide to assess the additional tax, input with a TC 290 for the amount shown on Form 5329 and allow CP 210/220 to generate to the taxpayer.

Only the additional tax reported in Part IX on Excess Accumulations is waived. If a taxpayer requests abatement of the 6 percent, 10 percent or 15 percent addition to tax in Parts I through Parts VIII, check the Instructions for Form 5329 for exceptions to when the additional tax does not apply. If no exception applies, send Letter 916C, Claim Incomplete for Processing; No Consideration, and advise the taxpayer that there are no provisions to waive the additional tax.

The United States Department of Agriculture (USDA) paid cash settlements and granted loan cancellations to various groups of farmers pursuant to settlements approved throughout the years. The settlements resulted from discrimination suits brought against the USDA by the farmers.

Taxpayers may use terms other than "USDA" when communicating about these claims. Some frequently used terms include:

The settlement amounts fell into three categories:

Most taxpayers received these payments over a period of two years, the cash payment and the debt forgiveness occurred in one year, and the tax payment is remitted to IRS in the following year. The cash payment and the tax payment (the 25 percent amount) are taxable income. The forgiveness of debt is generally taxable income excludable under certain circumstances. The payment of tax (25 percent payment):

Keepseagle and Pigford II settlements and Hispanic and Women Farmers and Ranchers settlements are divided into two categories:

If the recipient of this settlement is deceased, the executor of the estate must file a Form 1041. The recipient will receive a Form 1099 filed under the Employer Identification Number (EIN) of a trust or estate, or the Social Security Number (SSN) of the decedent.

If the estate or trust received a Form 1099 showing federal income tax withheld, it will check the box and include the amount withheld on income retained by the estate or trust in the total for line 24e.

Route U.S. Discrimination cases involving Form 1041 taxpayers or deceased taxpayers to the Kansas City campus. Complete Form 4442, Inquiry Referral, and e-fax to Kansas City AM, P & A, Bryan Becker, at 816-499-5161. Include a day and evening phone number for the taxpayer. See IRM 21.6.4.4.9.3, U.S. Discrimination Settlement Payments, for more information.

Under Section 139F a wrongfully incarcerated individual excludes from gross income any civil damages, restitution, or other monetary award (including compensatory or statutory damages and restitution imposed in a criminal matter) relating to their incarceration for the covered offense for which they are convicted. A covered offense is any criminal offense under federal or state law, including any criminal offense arising from the same course of conduct as that criminal offense. This exclusion applies whether or not the wrongfully incarcerated individual suffered a personal physical injury or physical sickness.

A wrongfully convicted individual is an individual who is convicted of a covered offense, served part or all of a sentence of imprisonment relating to the covered offense and meets any one of the following requirements:

Section 139F applies to taxable years beginning before, on, or after section 139F was enacted into law. A wrongfully incarcerated individual who included an award in income may file a claim for refund the later of the following:

The fiduciary of an estate, such as an executor or administrator, may claim a refund on behalf of a decedent who included in income in a prior tax year an award qualifying for the Wrongful Incarceration Exclusion. If the estate received a posthumous award and included it in income for a prior tax year on Form 1041, the fiduciary must file an amended Form 1041 for the estate to exclude the award from income and a claim a refund. See Pub 559, Survivors, Executors, and Administrators, for more information.

Kansas City Submission Processing expeditiously processes the claims. Assign ALL exonerated prisoner claims to IDRS 0933578782 with category code XRET. Update the case note with exonerated prisoner claim. See IRM 21.6.6.2.31, Tax Treatment of Compensation for Exonerated Prisoners, for more information.

If an award does not qualify for the exclusion from income under Section 139F and IRM 21.7.4.4.1.17(1), it may qualify for exclusion from income under Section 104(a)(2). The exclusion from income under Section 104(a)(2) applies to compensatory damages for personal physical injuries or physical sickness (including damages for economic losses flowing from the personal physical injuries or physical sickness) that an individual receives from a state for wrongful incarceration or conviction. Exclude these compensatory damages from income whether they are received in a lump sum, periodic payments, or a factoring transaction.

Forms 1041 that meet certain criteria ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ A systemic TC 570 is placed on the tax module to set the –R freeze to hold any refund until a review of the module is completed.

Identify these accounts by a TC 570 with all fives in the blocking series and serial number of the Document Locator Number (DLN), i.e., XXXXX-XXX-55555-X.

If an inquiry is received from a Form 1041 filer inquiring about the expected refund, research the account for a TC 570 posted to the account as described in the paragraph above.

If the tax module contains a TC 570 with all fives, prepare a Form 4442 and notate "unreversed TC 570" , and leave a history item on IDRS of "TC570ALL5S" and "ROUTETOFRP" , and route to:
Internal Revenue Service
Attn: FRP M/S 4450
1973 N. Rulon White Blvd.
Ogden, UT 84404

Advise the taxpayer that their inquiry is being forwarded to another department for resolution and apologize for the delay in resolving the issue.

Effective January 1, 2017, Computer Condition Code "E" (CCC) is edited on Form 1041, Form 1041-N, and/or Form 1041-QFT, (any year) if it is determined that the return is a potential identity theft filing. See IRM 3.11.14.8.4, CCC E - Potential ID Theft Filing, for additional information.

If a tax examiner in Submission Processing (SP) Code and Edit (C&E) finds a case with attachments or correspondence indicating the taxpayer is a victim of ID Theft, the case is referred to one of the SP BMF ID Theft liaisons. If the SP BMF Theft Liaison says the return is ID Theft, the tax examiner will edit CCC "E" . See IRM 25.23.11.6.3, BMF Returns Selected for RICS Review, for additional information.

When CCC "E" is edited on a return a TC 971 AC 711 will post to IDRS master file. This TC 971 code will cause the return to post as a TC 973 instead of a TC 150. In addition, a Letter 6042C is sent to the taxpayer requesting them to validate the filing of the return.

If the taxpayer contacts the IRS by telephone and the criteria above is met, follow the guidance in IRM 25.23.11.6.3, BMF Returns Selected for RICS Review. If correspondence is received responding to the 6042C Letter, route to:
RICS Unit, OSC
Mail Stop 9002
Ogden, UT 84401

For more information on potential BMF identify theft, see IRM 25.23.11.4, Business Master File (BMF) ID Theft Research.

For tax years beginning on or after January 1, 2018, Form 1065-B is no longer filed according to the Bipartisan Budget Act (BBA) of 2015. The BBA replaced the auditing and tax collection procedures for partnerships under the Tax Equity and Fiscal responsibility Act of 1982 (TEFRA) and the electing large partnership rules with the centralized partnership audit regime.

The Revenue Reconciliation Act of 1987 (1987 Act) enacted provisions relating to publicly traded partnerships (PTPs). A PTP is defined as any partnership whose partnership interests are (1) traded on an established securities market, or (2) readily tradable on a secondary market (or the substantial equivalent thereof). In general, a PTP is treated as a corporation, unless 90 percent or more of the gross income of such partnership for such taxable year consist of certain qualifying income.

The Taxpayer Relief Act of 1997 amended provisions of the 1987 Act and imposed for each taxable year on the income of each electing 1987 partnership a tax equal to 3.5 percent of such partnership’s gross income for the taxable year from the active conduct of trades and businesses by the partnership. An “electing 1987 partnership” means any publicly traded partnership if:

There are less than 10 electing partnerships in the country. These partnerships file returns in Ogden Submission Processing Center (OSPC).

The doc code for these returns is 67.

Programming is available to assess tax on original input in 2002. If a tax adjustment is required, use the following procedures:

Partnerships are generally required to have a tax year that conforms to the majority of its partners. Most partnerships file Form 1065 on a calendar year end basis. Two exceptions to this rule include:

For taxable years beginning before January 1, 2016, Form 1065 is due on or before the 15th day of the fourth month following the close of the tax year.

For taxable years beginning before January 1, 2016, the partnership can file Form 7004, Application for Automatic Extension of time to File Certain Business Income Tax, Information, and Other Returns to request an automatic 5-month extension of time to file. Taxpayers are required to file Form 7004 by the original return due date. For more information on extensions see IRM 21.7.4.4.2.5 IRM 21.7.4.4.2.6, Extensions of Time to File Form 1065.

For taxable years beginning after December 31, 2015, Section 2006(a)(1) of the Surface Transportation and Veterans Health Care Choice Improvement Act of 2015, P.L. 114-41 (the Act) changed the Form 1065 return due date. The Form 1065 is filed on or before the 15th day of the third month following the close of the tax year. This is the date the partnership tax year ended, as shown on the top of Form 1065.

For taxable years beginning after December 31, 2015, the Act changed the due date and the duration for filing Form 7004, Application for Automatic Extension of Time to File Certain Business Income Tax, Information, and Other Returns. Form 7004 is filed on or before the 15th day of the third month following the close of the tax year. The Act has changed the duration to a 6-month extension of time to file.

If the due date of a Form 1065 return falls on a Saturday, Sunday, or legal holiday, the partnership can file on the next day that is not a Saturday, Sunday, or legal holiday. For example, the Emancipation Day holiday in the District of Columbia was celebrated on Friday, April 15, 2022, allowing mid-April filers to be timely if they filed by Monday April 18, 2022. The Emancipation Day holiday in the District of Columbia was celebrated on Monday, April 17, 2023, allowing mid-April filers to be timely if they filed by Tuesday, April 18, 2023.

Schedule K (Form 1065), Partners’ Distributive Share Items, and Schedule K-2 (Form 1065), Partners’ Distributive Share Items—International, contain the total amount for each applicable item. Schedule K-1 (Form 1065), Partner’s Share of Income, Deductions, Credits, etc., and Schedule K-3 (Form 1065), Partner’s Share of Income, Deductions, Credits, etc.—International, contain the partner’s distributive share of the total amount of each applicable item. Schedules K-1 and K-3 are attached to Form 1065. The partnership provides the partner its applicable Schedules K-1 and K-3.

For loose Schedules K-1 and K-3 received, determine if they were sent due to possible assertion of a missing information penalty. See IRM 20.1.2.4.3, Penalty Relief, and IRM 21.7.4.4.2.7. Follow the table directly below.

Form 7004, Application for Automatic Extension of Time to File Certain Business Income Tax, Information and Other Returns, is used to request an automatic extension of time to file certain business income tax, information, and other returns. An extension of time to file Form 1065 is granted if the taxpayer completes Form 7004 properly and files the form by the due date of the Form 1065.

Beginning January 1, 2009, the extension of time to file partnership returns granted an automatic five-month extension and is only effective until tax years ending on, or before December 31, 2015.

Section 2006(a) of the Surface Transportation and Veterans Health Care Choice Improvement Act of 2015, P. L. 114-41, changed the due date for filing the tax return of a partnership, and the date by which a partnership must file Form 7004 for partnership returns have changed. Additionally, section 2006(b) allowed for a six-month extension of time to file Form 1065. The provisions are effective for tax years beginning after December 31, 2015:

Due to the late date that the legislation was passed, interim guidance was developed to handle extension requests received in 2016.

For more general information see IRM 21.7.4.3.5, Form 7004, Application for Automatic Extension of Time to File Certain Business Income Tax, Information, and Other Returns, Tax Periods Beginning on or Before December 31, 2015, and IRM 21.7.4.3.6, Form 7004, Application for Automatic Extension of Time to File Certain Business Income Tax, Information, and Other Returns, Tax Periods Beginning After December 31, 2015.

Use Publication 541, Partnerships, to determine the various forms and schedules required as attachments to Form 1065.

Partnerships may be assessed a penalty under IRC 6698(a)(1) for failure to timely file a return, including extensions (TC 160/TC 166) or a failure to provide information penalty (TC 240/246) under IRC 6698(a)(2), when Form 1065 is lacking the required information such as Schedules K-1, or a balance sheet. See IRM 20.1.2.4, Failure to File Partnership Return - IRC 6698, for more information. However, if the taxpayer supplies the information in a specified time period or states they are not required to file the form for which the penalty is charged, they may qualify for penalty abatement. See IRM 20.1.2.4.3, Penalty Relief, for more information. See IRM 3.12.15.4.41, Field 01MSC, Missing Schedule Code, for additional information on missing schedule codes:

The penalty is computed by multiplying the rate by the number of months or portions of a month late by the number of persons who were partners in the partnership for that year.

Beginning in 2022, the Form 1065 late and missing information penalties are assessed using the TC 240/246 PRN 722/723. After December 31, 2021, TC 16X will no longer be used to assess IRC 6698/6699 penalties. The penalties are assessed as follows:

Small partnerships, i.e., a partnership that has 10 or fewer partners, may qualify for a statutory exception. See IRM 20.1.2.4.3.1, Revenue Procedure 84-35, for details. Also, see IRM 20.1.1.3, Criteria for Relief from Penalties, for more information on penalty relief, including reasonable cause.

For information on penalties involving the requirement for large partnerships to file electronically, see IRM 21.7.4.4.2.8.1.1.

Section 8, Modification of Penalty for Failure to File Partnership Returns; Limitation on Disclosure, of the Mortgage Forgiveness Debt Relief Act of 2007, P.L. 110-142, increased the failure to file penalty and failure to file a complete return penalty on Form 1065 Partnership returns from $50 a month per partner to $85 per month per partner. The provision also increased the time period for calculating the penalty from five months to 12 months. The changes are effective for returns that are due on or after January 15, 2008 and before January 1, 2009. See the 10/01/2015 and prior revision of this IRM for the penalty rate for tax periods 200808 and prior.

Per Chief Counsel, the Failure to File Penalty increases to $200 per partner, per month, for a maximum of 12 months, for returns due after December 31, 2017. ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡≡ ≡ ≡≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡≡ ≡ ≡ Follow the chart below:

For more information regarding the penalty computation, see IRM 20.1.2.4.2, Penalty Computation, and the instructions for Form 1065.

For returns required to be filed during calendar years ending on or before December 31, 2023, all calendar year Form 1065 filers with 100 partners or less can file on paper or can voluntarily file their returns electronically. Certain partnerships with more than 100 partners must file electronically. See IRM 21.7.4.4.2.8.1, Partnerships with More Than 100 Partners, for information on partnerships with more than 100 partners.

Revised Treas. Reg. 301.6011-3, which is applicable to partnership returns that are required to be filed during calendar years beginning after December 31, 2023, requires a partnership to electronically file its return if:

The revised Treasury Regulation. 301.6011-3 authorizes the Commissioner to provide hardship waivers for partnerships that would experience hardship in complying with the e-filing requirements and administrative exemptions from the e-filing requirements to promote effective and efficient tax administration. Notice 2024-18, Section III provides guidance on these hardship waivers and administrative exemptions.

In the case of undue hardship, the IRS may waive the electronic filing rules if the partnership demonstrates that a hardship would result if it were required to file its return electronically. A partnership interested in requesting a waiver of the mandatory electronic filing requirement must file a written request in advance in accordance with the procedures in the Form 1065 instructions.

The revised regulations also grant an administrative exemption from the requirement to electronically file returns to partnerships whose use of the technology required to file electronically conflicts with their religious beliefs. Advance approval of an electronic filing administrative exemption is not required to file paper forms 1065 due to a religious exemption. Taxpayers must print in bold letters “Religious Exemption” at the top of page one of the return they file in paper form. See Topic no. 803, Electronic filing waivers and exemptions and filing extensions, for additional information.

Publication 4163, Modernized e-file (MeF) Information for Authorized IRS e-file Providers for Business Returns , is designed to provide Authorized IRS e-file Providers and Large Taxpayers specific requirements and procedures for electronic filing through the Modernized e-file System.

IRS e-file providers and applicants must submit their IRS e-file applications online. To register for e-Services, users navigate to the e-Services page Become an Authorized e-file Provider New users must also register by creating a profile with an IRS Credential Service Provider. The IRS uses ID.me, a technology provider, to provide identity verification and sign-in services, which allow access to e-Services. More information is available on IRS.gov at Register for IRS Online Self Help Tools.

Participating transmitters and software developers MUST successfully pass the Acceptance Assurance Testing System (ATS) in order to file Form 1065 electronically. Only those entities developing software or transmitting returns directly to the IRS go through the testing process. The ATS process tests hypothetical scenarios to ensure the participants computer program has the correct file specifications to file returns electronically, that required fields will post to master file correctly and that providers understand the mechanics of IRS e-file. All Transmitters must perform a Communications Test and be accepted. No further communications testing is required when adding additional forms to MeF and they are not required to test each year.

See Publication 3112, IRS e-file Application and Participation, Publication 5078, Modernized e-file Test Package, Business Submissions, Assurance Testing System (ATS), and Rev. Proc 2007-40 for more information on the testing process. Testing for Form 1065 is generally available in ATS by the start of November each year.

The MeF system will accept partnership returns for all years beginning with TY 2019. MeF also accepts amended returns for these tax years if the original return is filed via MeF. See IRM 21.7.9.4.1.2.2, MeF Filed Amended Returns, for more information. Taxpayers must complete an amended return on paper if they filed their original return on paper.

Ogden processes electronically filed partnership returns. The tax class is 2. The file location code (FLC) for e-filed returns is either 93, 92, or 88. Forms 1065 (except publicly traded partnerships) use doc code 65 if processed prior to 2007, and use doc code 69 if processed in 2007 and subsequent. Use doc code 67 for publicly traded partnerships. (See IRM 3.42.4.9.2, Identifying e-file BMF Identification Codes, for more information.)

Publication 4163, Modernized e-file (MeF) Information for Authorized IRS e-file Providers for Business Returns, for a complete listing of the forms and schedules accepted electronically. If a form cannot be filed electronically with the partnership return, taxpayers can attach it as a PDF document.

All returns filed through the MeF system must have signatures. If the return does not have a valid signature, the e-help Desk unit requests a signature. The MeF system requires taxpayers and Providers to use one of the two signature options:

The Practitioner PIN (Personal Identification Number) method (Form 8879) can only be used if the taxpayer uses an ERO. A paper copy of the signed Form 8879 is retained by the ERO and provided to the partnership but is not mailed to the IRS. Form 8879-PE is for Form 1065.

With the scanned Form 8453 method, Form 8453-PE, U.S. Partnership Declaration and Signature for Electronic Filing, is scanned and submitted with the e-filed return as a Portable Document Format (PDF) file. Form 8453-PE is not mailed to the IRS.

Use CFOL command codes to research the account. Request the original return only when necessary. Returns filed through the MeF system are stored immediately after the returns are processed on the Modernized Tax Return Database (MTRDB). The Employee User Portal (EUP) allows access to these returns through the Return Request and Display (RRD) subsystem. For more information on how to gain access to EUP, see IRM 3.42.4.5.1, Employee User Portal (EUP).

DO NOT attach information (e.g., loose forms, schedules, and correspondence) to an electronically filed return. To identify an electronic DLN, see Document 6209, Section 4, Document Locator Number, Part 3 Campus and Filing Location Codes, or IRM 3.42.4.9.2.1, Researching e-file BMF Identification Codes. Use the following procedures when adjusting a return using a non-refile DLN: File the information using TC 290 $.00 with the applicable blocking series for the type of return/situation. DO NOT use an "attachment" or "association form."

Form 1065X, Amended Return or Administrative Adjustment Request (AAR), is available for both Form 1065 and Form 1066 filers to amend their federal tax return. Form 1065X is available for use by partnerships and REMICs that file paper returns. Taxpayers may use Form 1065X to amend prior years where the statute is open.

Form 1065X will not be available in the e-file system for at least a year and possibly much longer. Partnerships required to file electronically will use the old Form 1065 in the electronic filing system, mark the amended box, and attach an electronic Form 8082, Notice of Inconsistent Treatment or Administrative Adjustment Request (AAR).

The Tax Equity and Fiscal Responsibility Act of 1982 (TEFRA) allows for the filing of an Administrative Adjustment Request (AAR) by a flow-through entity (partnership or LLC). Form 8082, Notice of Inconsistent Treatment or Amended Return (Administrative Adjustment Request (AAR)), was designed to alert IRS to this condition.

To correct errors on partnership-related items, partnerships under the Bipartisan Budget Act (BBA) must file an Administrative Adjustment Request (AAR) instead of an amended return. This applies to partnerships for taxable years beginning after December 31, 2017 and partnerships that elect into the BBA regime for taxable years beginning after November 2, 2015 and before January 1, 2018. Partnerships cannot file an AAR to only change a partnership representative (PR) designation.

The Bipartisan Budget Act of 2015 (BBA) centralized partnership audit regime generally provides for determination of adjustments, and assessment and collection of tax attributable to such adjustments at the partnership level unless the partnership made certain elections. After January 1, 2018, if the partnership is filing an AAR to elect into BBA for a partnership taxable year beginning after November 2, 2015 and before January 1, 2018, see the instructions to the Form 8082 for more information.

Form 8082 is used by partners, S corporation shareholders, beneficiaries of estates or trusts, owners of a foreign trust, or residual interest holder in real estate mortgage investment conduit (REMIC) to notify the IRS of inconsistencies between the tax treatment of an item on their returns vs. the way the pass-through entity treated and reported the item on its return.

Since Form 8082 is not consistently being attached as required, the amended/corrected/superseding Form 1065 returns that meet any of the criteria below must be routed to Examination as CAT-A criteria:

Partnerships that file amended returns on Form 1065X, must be routed to Exam as CAT-A criteria if any of the following conditions below are met:

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Action required on the amended/corrected/superseding returns that meet the criteria in paragraphs ( 7), (8) or (9)) directly above:

Form 1065 claims and/or amended returns involving Ponzi Scheme issues (including language discussing removal of phantom or fraudulent income), may meet Examination criteria. Route to Examination as CAT-A ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ See IRM Exhibit 21.5.3-2, Examination Criteria (CAT-A) - General, for more information.

For Forms 1065/1065X, stating “Microcaptive”, see IRM 21.7.4.4.4.20, Micro-Captive Insurance Amended Returns, for processing instructions.

Follow procedures in IRM 21.7.9.4.1, Resolving TRNS 193 and Amended/Corrected/Supplemental Returns, along with the instructions above, if a TRNS 193 is generated and the returns are secured and routed to Accounts Management for processing. For specific items to compare on Form 1065. See IRM 21.7.4.4.2.9.1, Items to Compare on TRNS 193s (Form 1065).

See IRM 21.7.9.4.1.6, Duplicate Filing Conditions Involving Returns Prepared Under IRC Section 6020(b), when the TC 150 is a 6020(b) and the TC 976 is the taxpayers original return or when the TC 150 is the taxpayers return and the TC 976 is the 6020(b).

Banks acting as managers for underwriting syndicates to issue bonds are permitted to use the same EIN when filing partnership returns on behalf of each syndicate.

TRNS 193s are suppressed on these cases. The first return posts as a TC 150 and subsequent returns as TC 976s. A "Consolidated Transcript" is generated when overflow conditions are reached. Action required:

A CP 282 Notice, Notification of Possible Additional Partnership Filing Requirements, is issued to Form 1065 filers who marked the "YES" checkbox next to question 14 on tax year 2018 forms and subsequent (question 16 on prior year forms), Foreign Partners, on Schedule B, Form 1065. This shows that the partnership had foreign partners (for purposes of IRC 1446) during the tax year. Both the Cincinnati and Ogden campuses work these responses.

Generally, when a foreign person engages in a trade or business in the United States, which can occur if a nonresident alien individual, or foreign corporation is a partner in a partnership so engaged, income, gain, or loss arising from the activities of that trade or business, is considered as effectively connected to such trade or business (known as Effectively Connected Income (ECI)). It is the partnership's (CPA, attorney, accountant) responsibility to determine if the partnership has ECI allocable to a foreign partner. More information on ECI see IRM 21.8.1.12.10, Effectively Connected Income (ECI), and also see Effectively Connected Income (ECI).

A partnership that has partnership items which are effectively connected (or treated as effectively connected) with the conduct of a trade or business in the United States, must report to the IRS under IRC 1446 effectively connected gross income allocable to foreign partners (without regards to distributions) on Form 8804 , Annual Return for Partnership Withholding Tax (Section 1446). In addition, they must pay a withholding tax on the effectively connected taxable income (ECTI) that is allocable to one or more partners, and file Form 8804, Form 8805, Foreign Partner’s Information Statement of section 1446 Withholding Tax and Form 8813, Partnership Withholding Tax Payment Voucher.

For information on reporting and paying the Section 1446 withholding tax as well as the general reporting obligations, see Form 8804 and the Instructions for Form 8804, Annual Return For Partnership Withholding Tax, Form 8805, and Form 8813. See also Publication 515 , Withholding of Tax on Nonresident Aliens and Foreign Entities.

Special rules apply to publicly traded partnerships. Unlike all other partnerships which withhold in the year the ECTI is allocated to a foreign partner, publicly traded partnerships withhold in the year there is a distribution to a foreign partner. Also, instead of filing Form 8804, Form 8805, or Form 8813, publicly traded partnerships must file Form 1042 and Form 1042-S.

If the taxpayer contacts IRS and states:

Rev. Proc. 2003-84, 2003-48 I.R.B. 1159, allows certain partnerships that invest in tax-exempt obligations to make an election that enables the partners to take into account monthly inclusions required under IRC 702 and IRC 707(c) of the IRC and provides rules for partnership income tax reporting. Thus, a partnership that has a monthly closing election in effect for the entire taxable year and meets the other requirements in section 8 of this revenue procedure, is not required to file a Form 1065 or issue Schedules K-1 (Form 1065).

An eligible partnership makes a monthly closing election by providing in the entity’s governing documents that the partnership is making a monthly closing election that is effective as provided under section 5.02 of this revenue procedure and all partners consent to the election.

The monthly closing election is effective on the later of:

A partnership must file an abbreviated return (considered abbreviated because only certain information is required and completed on the form) for the first taxable year during which the monthly closing election is in effect. The abbreviated return is filed by the date the partnership’s income tax return is ordinarily due and must be signed by a person with the authority to sign the partnership’s Form 1065 return. Taxpayers must type or write the words "Filed in Accordance with Rev. Proc. 2003-84" across the top of the form.

See Rev. Proc. 2003-84 for the specific information that is included on the abbreviated return.

Action required: If a taxpayer states they previously filed a Form 1065 under Rev. Proc. 2003-84, conduct account research to look for a copy of the abbreviated return for the first taxable year for which the election is in effect. Check the filing requirements to see if they are still active. If so, delete them by inputting TC 591 closing code 025 via command code FRM49. If a taxpayer is penalized for failing to file Form 1065 for a tax period AFTER they have filed the required abbreviated return, abate the penalty using penalty reason code 045, Service Error. Either contact the taxpayer by phone or send Letter 3012C, Partnership Return Filing Requirements: Form 1065, and advise the taxpayer that, based on the information provided they are not required to file future partnership returns. Apologize for any inconvenience.

Beginning with tax year 2006 returns, any entity that files Form 1065 or Form 1065-B must complete and file Schedule M-3 in lieu of Schedule M-1, Reconciliation of Income (Loss) per Books With Income (Loss) per Return, if any of the following applies (See the Instructions for Form 1065 for more information):

Form 1041 and Form 1065 filers may pay their taxes by phone or internet using a credit or debit card. Service providers accept payments made using an American Express Card, Discover Card, MasterCard, or VISA Card. The IRS does not determine which credit cards the service providers accept.

Taxpayers have the option to either use an IRS e-pay service provider or an integrated IRS e-file and e-pay service provider. The service providers offer these options to taxpayers who file on paper or electronically. The payment options are available 24 hours a day, 7 days a week. The service providers charge convenience fees for the services. See IRM 21.2.1.48.5, Credit or Debit Card Payments (Pay by Phone or Internet), for more specific information.

Also see IRM 21.2.1.48.4, Payment by Credit or Debit Card (Integrated e-file and e-pay), for other payment options.

The Tax Cuts and Jobs Act of 2017 (TCJA), Section 13502 Modify Definition of Substantial Built-In Loss in the Case of Transfer of Partnership Interest, amended the definition of a substantial built-in loss with respect to a transfer of a partnership interest. Under section 743(d), a partnership has a substantial built-in loss if:

This applies to transfers of partnership interests after December 31, 2017. See IRC 743(d).

If the partnership is required to adjust the basis of partnership assets under IRC 743(b) or IRC 734(b) because of a substantial built-in-loss (as defined under IRC 743(d)) or substantial basis reduction (as defined under IRC 734(b)) they must mark yes in question 10(c) of the Form 1065.

Form 1066 is a calendar year return. For taxable years beginning before January 1, 2016, the federal income tax return of a REMIC is due on or before the 15th day of the fourth month following the close of the taxable year as shown on the top of the return. If the REMIC ceases to exist before the end of the calendar year, a short period return is due on the 15th day of the fourth month following the date the entity ceased to exist.

Section 2006(a)(1) of the Surface Transportation and Veterans Health Care Choice Improvement Act of 2015 (the Act), P. L. 114-41, changed the income tax return due date for REMICs and is effective for taxable years beginning after December 31, 2015. Taxpayers must file the federal income tax returns of REMICs under section 6031 made on the basis of the calendar year on or before the 15th day of March following the close of the calendar year. Taxpayers filing such returns made on the basis of a fiscal year must file on or before the 15th day of the third month following the close of the fiscal year. Therefore, TY 201612 calendar year Form 1066 REMIC returns are due March 15, 2017.

A REMIC must pay the tax in full by the due date of the return. No estimated tax payments are required. REMICs must use electronic funds transfer to make all federal tax deposits (such as deposits of employment tax, excise tax, and income tax). Electronic fund transfers are made using the Electronic Federal Tax Payment System (EFTPS).

When tax is reported on a late filed Form 1066, the return is subject to the Failure to Pay Penalty under IRC 6651(a)(2), and the Failure to File Penalty under IRC 6651(a)(1). If no tax is reported on the return, the REMIC is subject to the Failure to File penalty under IRC 6698. See IRM 20.1.2.4.3.4, REMIC Special Considerations, for information on working penalty abatement requests.

Form 7004, Application for Automatic Extension of Time to File Certain Business Income Tax, Information and Other Returns, is used to request an automatic extension of time to file certain business income tax, information, and other returns. An extension of time to file Form 1066 is granted if the taxpayer completes Form 7004 properly and files the form by the due date of the Form 1066 to which it applies.

For tax year 2008 and prior, Form 7004 granted an automatic 6-month extension period for most BMF business returns. However, beginning January 1, 2009, to reduce the burden on recipients of Schedules K-1, the extension of time to file REMIC returns was shortened from six months to five months.

Section 2006(a) of the Surface Transportation and Veterans Health Care Choice Improvement Act of 2015, P. L. 114-41, changed the due date for filing the tax return of a REMIC, and thus the date by which a REMIC must file Form 7004 has changed. Additionally, section 2006(b) changed the duration of the extension of time to file Form 1066. The provisions are effective for tax years beginning after December 31, 2015:

See IRM 21.7.4.3.5, Form 7004, Application for Automatic Extension of Time to File Certain Business Income Tax, Information, and Other Returns, Tax Periods Beginning on or Before December 31, 2015, and IRM 21.7.4.3.6, Form 7004, Application for Automatic Extension of Time to File Certain Business Income Tax, Information, and Other Returns, Tax Periods Beginning After December 31, 2015, for more general information.

Taxpayers can file amended Form 1066. They are "G" coded and routed to Ogden Accounts Management. Form 1065X is available for use by REMICs that file paper returns. The 1065X is not available in the e-file system for at least a year and possibly much longer. Taxpayers may use Form 1065X to amend prior year Form 1066 returns where the statute is open.

Route all amended returns and correspondence by a real estate mortgage investment conduit (REMIC, Form 1066) to Ogden Accounts Management Campus, Mail Stop 6740. For CII cases, do not select “Reroute.” Update the CII case page to Form 1066, MFT 07, and reassign to IDRS number 0441605253. If the amended return or correspondence involves "foreclosure property," see IRM 21.7.4.4.3.4, Foreclosure Property Extension Requests.

Action required:

A copy of Schedule Q is sent to each residual interest holder by the last day of the month following the end of the calendar quarter. Schedule Q notifies the taxpayer of their share of the REMICs quarterly taxable income (or net loss), the excess inclusion with respect to their interest, and their share of the REMICs IRC 212 expenses for the quarter.

The original Schedules Q (Copy A) for all quarters are attached and filed with Form 1066.

Route all amended returns and correspondence by a real estate mortgage investment conduit (REMIC, Form 1066) to Ogden Accounts Management Campus, Mail Stop 6715. Also, route all requests for extension of "foreclosure property" grace period pursuant to IRC 856(e) to Ogden Accounts Management, Mail Stop 6740. If CII case re-control to 0441605253.

If the correspondence includes a Form 2848, Power of Attorney and Declaration of Representative, or Form 8821, Tax Information Authorization, the form must be signed by the taxpayer (Typically by the trustee of the account.). ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡"≡ ≡ ≡ ≡ ≡ ≡" ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡≡ ≡ ≡ ≡ ≡≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡

An extension request is timely if it is filed more than 60 days before the grace period would expire.

If the request is timely filed, Ogden Accounts Management will send the taxpayer a Letter 96C, Acknowledgment Letter for General Use/Inquiry. In addition, Ogden will input a CII history statement that an extension request was received and that a Letter 96C was issued. Capture the screen of the Letter 96C for a record of the paragraphs used.

In the 96C letter, use the open paragraphs and the enclosure option to address extension requests. Input the two open paragraphs per the first two of the following bullets and follow the instructions in the third bullet:

If the request is not timely filed, Ogden Accounts Management will send the taxpayer a Letter 3064C, IDRS Special Letter. In addition, Ogden will input a CII history statement that an extension request was received and that a Letter 3064C was issued. Capture the screen of the Letter 3064C, for a record of the paragraphs used.

In the Letter 3064C, use the open paragraphs and the enclosure option to address extension requests. Input the two open paragraphs per the first two of the following bullets and follow the instructions in the third bullet:

If a subsequent inquiry is received "AFTER" a Letter 96C or Letter 3064C is sent (check ENMOD), advise the taxpayer that they may call the non-toll-free numbers below if they have any questions and may speak to one of the:
Subject Matter Experts RICs, REITs, and REMICs
Internal Revenue Service
LB&I, Financial Services
847-737-6666
Between 8:30 AM and 5:00 PM (CST)

Corporations can file several types of Form 1120 depending on its business. Listed below are the types in the sequence they appear in this section:

A newly organized corporation, except a Subchapter S or personal service corporation, can elect any accounting period (Fiscal Year Month (FYM)). Generally, an S corporation must file on the calendar year unless it meets certain criteria as outlined in the Instructions for Form 1120-S or makes a section 444 election (See IRM 21.7.4.4.7, Form 8752, Required Payment or Refund Under Section 7519, for information on the tax year of section 444 filers).

For taxable years beginning before January 1, 2016, most Form 1120 corporation returns (except Form 1120-C filers who meet the requirements of section 6072(d) and Form 1120-IC-DISC) are due on or before the 15th day of the third month after the end of the tax year. A corporation filing a short period return must file by the 15th day of the 3rd month following the end of the short tax year. A dissolving corporation is required to file a final return for the short period that begins on the first day of its normal accounting period and ends on the date of dissolution. The return is due on or before the 15th day of the 3rd month following the close of the short tax year.

In addition, for taxable years beginning before January 1, 2016, the corporation could request an automatic 6-month extension of time to file on Form 7004. For example, Form 1120 returns for tax year 201512 are due on or before March 15, 2016 and if an extension of time to file is requested timely the return is due on or before September 15, 2016.

If the due date of a Form 1120 series return falls on a Saturday, Sunday, or legal holiday, the corporation can file on the next day that is not a Saturday, Sunday, or legal holiday. See IRM Exhibit 3.11.16-2, Due Date Charts, for Form 1120 series due dates.

A personal service corporation, as defined in Regulations Section 1.441-3(c), must use the calendar year, unless it meets one of the criteria below:

Corporations with fiscal tax periods beginning before January 1, 2018, and ending after December 31, 2017, figure and apportion their tax by blending the 35 percent rate in effect before January 1, 2018 with the 21 percent rate in effect after December 31, 2017 (e.g., blended rate). See IRM 3.12.251.32, Form 1120, Tax Rates, for more information on figuring blended rates.

An affiliated group of corporations can elect to file a consolidated income tax return.

The consolidated return is filed on the basis of the common parent’s corporate annual accounting period.

The consolidated return must include all the income of the parent corporation plus the income of each subsidiary for the portion of such taxable year during which it was a member of the group.

Form 851, Affiliations Schedule, is filed to identify the common parent corporation and each member of the affiliated group, and for making the determination that each subsidiary corporation qualifies as a member of the affiliated group. See the General Instructions for Form 851, for the requirements to qualify as an affiliated group. An affiliated group is one or more chains of includible corporations connected through stock ownership with a common parent corporation. See IRC 1504(a) and (b) for more information. Form 851 is filed with the consolidated tax return for the group. See IRM 21.3.3.5.2, Loose Forms/Schedules, for procedures for working loose Form 851.

Income not included in the consolidated return by a corporation, because it is not in the group for its complete taxable year, is reported on a separate return. See the table below.

Form 7004, Application for Automatic Extension of Time to File Certain Business Income Tax, Information, and Other Returns, is used to request an automatic extension of time to file certain business income tax, information, and other returns. An extension of time to file Form 1120 is granted if the taxpayer completes Form 7004 properly, makes a proper estimate of the tax (if applicable), files the form by the due date of the return to which the Form 7004 applies, and pays any tax that is due.

Form 7004 is filed on or before the due date of the Form 1120. Form 7004 does not extend the time for payment of tax. Therefore, to avoid interest charges and a late payment penalty, payment of any balance due on line 8 of Form 7004 is required by the due date of the return for which the request for extension is filed.

For tax years beginning before January 1, 2016, a taxpayer could obtain a six-month extension period for most Form 1120 series returns by filing Form 7004. Section 2006(c) of the Surface Transportation and Veterans Health Care Choice Improvement Act of 2015, P. L. 114-41, changed the due date for filing the tax return of most C corporations, and thus the date by which a C corporation must file Form 7004 for the Form 1120 family of corporate returns (except Form 1120-C, Form 1120-S, and Form 1120-IC-DISC) has changed. Section 2006(c) changed the duration of the automatic extension of time to file. The effective provisions for tax years beginning after December 31, 2015 show the following:

Due to the late date that the legislation was passed, IDRS programming was not completed until January 2017. Therefore, interim guidance was developed to handle extension requests received in 2016.

Timely filed calendar year Form 7004 is no longer date stamped and the envelope is no longer retained. However, the first document within a block of these forms will contain a received date. If the form is delinquent but the postmark on the envelope is timely, Code and Edit circles the received date. Consider timely any calendar year (200312 and subsequent) Form 7004 that is not date stamped. Follow IRM 20.1.2.2.3, Extension of Time to File and Pay, for penalty abatement procedures.

The taxpayer shows on line 6, Form 7004, the tentative amount of tax for the taxable year. The amount is identified by TC 620 and is for reference purposes only.

Even though a corporation has an extension of time to file, a failure to pay penalty may be assessed if the amount paid on or before the un-extended due date of the return, is not at least 90 percent of the total tax shown on the relevant Form 1120. See IRM 20.1.2.2.3, Extension of Time to File and Pay, for more information.

The filing of Form 7004 does not affect the amount of interest assessed. Interest is assessed on any unpaid liability from the original due date of the return until the balance is paid in full.

When correspondence is received requesting an explanation of the interest and/or penalties:

See IRM 21.7.4.3.5, Form 7004, Application for Automatic Extension of Time To File Certain Business Income Tax, Information, and Other Returns, for additional information.

Under certain conditions, corporations (other than Subchapter S or personal service corporations and as defined in Revenue Procedure 2006-45 as clarified and changed by Revenue Procedure 2007-64) may obtain automatic approval to adopt, change, or retain its annual accounting period under IRC 442. See Rev. Proc. 2006-45, 2006-45 I.R.B. 851, In addition, see Rev. Proc. 2007-64, 2007-42 I.R.B. 818, which changes a scope provision and one of the terms and conditions under with IRS grants approval under Rev. Proc. 2006-45. If a taxpayer does not qualify to make the change under the automatic procedures of Rev. Proc. 2006-45, the taxpayer must make the change under Rev. Proc. 2002-39, I.R.B. 2002-22, (as clarified and modified by Notice 2002-72 and modified by Rev. Procs. 2003-34, 2003-79, and 2018-17).

Generally, to request a ruling to adopt, change or retain a tax year, the taxpayer must file its Form 1128 by the due date (not including extensions) of the federal income tax return for the first effective year. To request automatic approval to change a tax year under Rev. Proc. 2006-45 , the taxpayer must file by the due date of the return (including extensions) for the short period required to effect the change. Under Pub. L. No. 114-41, section 2006(a), 129 Stat, 443, the due date for filing C corporation returns under IRC 6072 (a), the due date for filing C corporation returns was changed from March 15 to April 15 for calendar year taxpayers and from the 15th day of the third month following the close of the taxable year to the 15th day of the fourth month following the close of the taxable year for fiscal year taxpayers. For a C corporation with a taxable year ending on June 30, the change in due date begins in 2026. This change applies for taxable years beginning after December 31, 2015, except for a corporation with a year ending on June 30, in which case the new rule applies for tax years beginning after December 31, 2025. Pub. L. No. 114-41, section 2006(a).

Entities other than corporations may also obtain automatic approval to adopt, change, or retain its annual accounting period under IRC 442. See Rev. Proc. 2006-46, 2006-45 I.R.B. 859.

See Publication 538, Accounting Periods and Methods, for more information on accounting periods and the Instruction to Form 1128.

A change in accounting period is identified by TC 053 or 054 on cc ENMOD.

Section 13001 of P.L. 115-97, Tax Cuts and Jobs Act (TCJA), replaced the graduated corporate tax structure with a flat rate of 21 percent tax rate effective for taxable years beginning after December 31, 2017. A corporation’s tax is computed by multiplying taxable income by 21 percent,

Form 1120 filers compute tax on Schedule J using the Instructions for Form 1120. Most corporations figure their tax by using the tax rate schedule below. Follow the Schedule J submitted by the taxpayer, for consideration of other credits or taxes as applicable. The total tax on Schedule J is entered on the "Total tax" line on Form 1120.

Corporations with a fiscal year beginning before January 1, 2018, and ending after December 31, 2017, will pay federal income tax using a blended pro-rated tax and not the flat 21 percent tax rate. To calculate the pro-rated tax, corporations must calculate their tax for the entire year twice: first using the pre-TCJA tax rates, and then using the new 21 percent rate. Then, they multiply each of these tax amounts by the fraction of the fiscal year during which the corresponding rate was in effect, and add the amounts together to produce the federal income tax for the fiscal year. For additional information on computing the corporation’s blended rate, see the table in IRM 3.12.251.33, Form 1120, Tax Rates.

If the taxpayer needs further guidance refer them to the Form 1120 Instructions and Notice 2018-38, 2018-18 I.R.B. 522, for more information.

For computing tax on short period returns (annualizing tax), see Publication 538, Accounting Periods and Methods. Do not annualize tax on short period initial or final returns.

Taxpayers must complete the Form 1120 schedules as part of the 1120 tax package. The taxpayer is also required to submit various forms to substantiate credits or tax items applicable to the return. See the schedules and forms listed below: